CGS-CIMB Research analysts William Tng and Caleb Pang have lowered their target price for Innotek to 47.8 cents from 57.9 cents previously due to a weak 1H20 for the company, but still maintained its “add” rating for the stock.
On August 13, the mainboard-listed metal precision part maker posted 10.8% lower revenue y-o-y to $79.7 million, while gross profit dipped 14.3% y-o-y to $17.1 million.
Earnings for 1H20 plunged 51.7% y-o-y lower to $3.7 million due to higher interest expenses and fair value losses on investments.
While no interim dividend was declared, the group remains in a net cash position, noted the analysts.
On the figures, Tng and Pang noted that while Innotek’s 1H20 revenue came in line with their expectations at 50% of their FY20F estimates, profits for the half-year stood only at 35% of their forecast.
Consequently, the analysts have cut their forecasts for Innotek’s earnings per share (EPS) by 10-26% due to the higher interest expense the company logged in 1H20.
Tng and Pang have also projected dividend yields of 3.75% over FY20-22F, based on the assumption that the company maintains its FY18-19 historical distribution per share (DPS) of 1.5 cents per annum.
In its outlook for 2H20, Innotek guided that demand for the group’s TV bezel segment is expected to see a steady flow of orders in the second half of the FY.
In 1H20, demand for the TV segment was stable on the back of increasing demand for home entertainment products, as more people stayed at home during the Covid-19 pandemic. However, it expects demand for its office automation segment to remain weak due to the ongoing pandemic.
Meanwhile, the domestic automobile market was impacted by the Covid-19 pandemic in 1Q20 but recovered gradually in 2Q20. The China Automobile Manufacturers Association reported that automotive sales in China increased by 11.6% y-o-y in June.
However, Innotek noted that the overseas automotive markets continue to be impacted by the Covid-19 pandemic, and expects a gradual recovery for its automotive segment in 2H20.
As at 1.49pm, Shares of Innotek were trading flat at 39 cents, with an FY20 price to book ratio of 0.55 and forecasted dividend yield of 3.75%
